Grissom: Unit 5
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21 terms
Terms | Definitions |
|---|---|
 Medium of exchange | anything that is generally accepted as a standard of value and a measure of wealth in a particular country or region |
| Unit of account | a common unit for measuring the value of each good or service |
| Store of value | an item that people can use to transfer purchasing power from the present to the future |
| M1 | narrowest measure of the money supply that includes all coins and paper bills in circulation, traveler's checks, checking account balances, and balances in credit unions |
| M2 | All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits. |
| Legal Tender | Any kind of money that a creditor must, by law, accept in payment for debts |
| FOMC | The Federal Open Market Committee is the most powerful committee of the FED, because it makes the decisions that affect the economy as a whole by manipulating the money supply. |
| Balance Sheet | a financial statement that reports assets, liabilities, and owner's equity on a specific date |
| Fractional Reserve Banking | a banking system that keeps only a fraction of funds on hand and lends out the remainder |
| Profit | the amount of money left over after all the costs of production have been paid |
| Liquidity | being in cash or easily convertible to cash |
| Federal Funds Rate | the interest rate at which banks make overnight loans to one another |
| Monetary Policy | policy that involves changing the rate of growth of the money supply in circulation in order to affect the cost and availability of credit |
| Open Market Operations | the buying and selling of government securities to alter the supply of money |
| Discount Rate | the rate of interest set by the Federal Reserve that member banks are charged when they borrow money through the Federal Reserve System |
| Easy Money | the economic condition in which credit is easy to secure |
| Tight Money | the economic condition in which credit is difficult to secure and interest rates are high |
| Prime Interest Rate | the interest rate on short-term loans that banks charge their commercial customers with high credit ratings |
| Velocity of Money | the average number of times each dollar in the money supply is used to purchase goods and services included in GDP |
| Cyclical Asymmetry | the idea that monetary policy may be more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession |
| Inflation Targeting | conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation |
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